RIL to soon get formal nod for KG gas price
The oil ministry had sought the law ministry’s opinion before giving a formal nod to RIL’s KG Basin gas-pricing formula though it had been approved by the empowered group of ministers.
By Rajeev Jayaswal, TNN |
NEW DELHI: After a delay of over four months, Reliance Industries is set to receive the formal approval from the government for its KG Basin gas pricing formula. The approval, which will pave the way for gas deals with customers, comes almost a month after the empowered group of ministers’ (EGoM) decision to price the gas at $ 4.2 per mmbtu.
“A formal note (letter) is being drafted and is expected to be sent to RIL shortly,” a government official said. Hectic parleys have been on since Monday to sort out minute details before the formal approval is awarded. Officials were busy till late Wednesday evening deliberating on various issues pertaining to RIL’s KG Basin gas deal contract.
RIL, which is scheduled to begin production from its fields by June 2008, has been waiting for the approval as it will enable the company to convert the bids received from customers into legally tenable contracts.
It remains to be seen whether RIL will sign up deals to sell gas at the market discovered price of $4.33 per mmbtu or at the EGoM-approved price of $4.2 per mmbtu. The company is well within its rights under the production sharing contract to sell at the market-discovered price. The EGoM has approved a minimum price for the government, which is to take a share of the profit.
The petroleum ministry is learnt to have sought the law ministry’s opinion before giving a formal nod to RIL’s gas pricing formula though it had been approved by the EGoM. The Pranab Mukherjee-led EGoM had cleared RIL’s gas price on September 12.
It is learnt that the petroleum ministry was working on finetuning ‘certain conditions’, including ‘life of the contract’ and ‘issues related to price revision at the end of the term period of the contract’. After finalising these points, the ministry sought the law ministry’s opinion before giving a formal approval letter to RIL, sources said. According to them, a formal approval could be expected only next week.
RIL is eagerly looking forward to a formal approval to go ahead with its gas contracts with potential customers. The gas from the block is scheduled to start flowing in by mid-next year. The delay in getting a formal approval would have an adverse impact on the work schedule.
So far, the EGoM has approved only a gas-pricing formula, applicable to the gas produced under provisions of the New Exploration Licensing Policy (NELP) rounds one to six. It will meet again next month to take up various issues including commercial utilisation of natural gas under the NELP regime.
The EGoM’s decision has only approved the pricing formula for valuation of the government’s profit share, which translates to a minimum selling price of $4.2 per mmbtu. However, RIL is free to sell the gas at a higher price, but it will then have to pay a higher profit petroleum to the government.
“A formal note (letter) is being drafted and is expected to be sent to RIL shortly,” a government official said. Hectic parleys have been on since Monday to sort out minute details before the formal approval is awarded. Officials were busy till late Wednesday evening deliberating on various issues pertaining to RIL’s KG Basin gas deal contract.
RIL, which is scheduled to begin production from its fields by June 2008, has been waiting for the approval as it will enable the company to convert the bids received from customers into legally tenable contracts.
It remains to be seen whether RIL will sign up deals to sell gas at the market discovered price of $4.33 per mmbtu or at the EGoM-approved price of $4.2 per mmbtu. The company is well within its rights under the production sharing contract to sell at the market-discovered price. The EGoM has approved a minimum price for the government, which is to take a share of the profit.
The petroleum ministry is learnt to have sought the law ministry’s opinion before giving a formal nod to RIL’s gas pricing formula though it had been approved by the EGoM. The Pranab Mukherjee-led EGoM had cleared RIL’s gas price on September 12.
It is learnt that the petroleum ministry was working on finetuning ‘certain conditions’, including ‘life of the contract’ and ‘issues related to price revision at the end of the term period of the contract’. After finalising these points, the ministry sought the law ministry’s opinion before giving a formal approval letter to RIL, sources said. According to them, a formal approval could be expected only next week.
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RIL is eagerly looking forward to a formal approval to go ahead with its gas contracts with potential customers. The gas from the block is scheduled to start flowing in by mid-next year. The delay in getting a formal approval would have an adverse impact on the work schedule.
So far, the EGoM has approved only a gas-pricing formula, applicable to the gas produced under provisions of the New Exploration Licensing Policy (NELP) rounds one to six. It will meet again next month to take up various issues including commercial utilisation of natural gas under the NELP regime.
The EGoM’s decision has only approved the pricing formula for valuation of the government’s profit share, which translates to a minimum selling price of $4.2 per mmbtu. However, RIL is free to sell the gas at a higher price, but it will then have to pay a higher profit petroleum to the government.
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